Data Integrity & Pharma

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COVER STORY Pharma

On a cold Sunday after-

noon in January, Peter E.

Baker is in Toansa vil-

lage, Punjab. He is at the

gates of the showcase

plant of Ranbaxy, India’s

leading pharmaceutical

company, some 160 km

from Chandigarh air-

port. This plant makes

the active ingredients that go into tablets. The

security guard seems unaware not only about

who Baker is, but also about the organisation

he represents – the US Food and Drug

Administration (FDA). He contacts the plant

supervisor.

Drug industry executives know Baker

only too well. A senior executive at a

Mumbai-based pharma major says of Baker,

a veteran investigator with the FDA: “Not

only does he catch you when you least expect

him to, but his style of functioning is unique.

He will look at the most unexpected places in

the plant... If he finds anything wrong, he will

doubt everything, and you’ve had it.”

INTENSIVE

SCAREThe US regulator’s increasedscrutiny of Indian drug exportersis giving the pharmaceuticalindustry the jitters. By E. KUMAR SHARMA

R A J V E R M A

March 16 2014 BUSINESS TODAY 51



a key market for the Indian

generic drug makers. India

supplies around 40 per cent

o f t h e g en er ic d ru g s

and over-the-counter prod-

ucts sold in the US.

Why the US MattersEstimates vary, but the point is

that the US is important for

Indian drug companies. Going

by Pharmexcil (Pharmaceutical

Export Promotion Council of

India, a government body) data,

the 40 per cent figure is by volume

since, India’s share in the $63-bil-lion US generics market in

2012 was 3.07 per cent by

value. Even so, the FDA

notes that India is the sec-

ond largest provider of fin-

ished dose products to the

US, with almost 10 per cent

of that market. India has the

second largest number of

FDA-approved plants for in-

gredients and formulations –

370 plants, to be precise –

outside of the US.

So it’s not surprising, re-

ally, that Indian drug compa-

nies are under increasing scru-

tiny by the US regulator. FDA

Commissioner Margaret A.

Hamburg told Business Today in

an email interview (businessto-

day.in/usfda-hamburg ) during

her recent visit to India: “We will

increase our presence in India. In

March 2013, we received approv-

als from the Indian government to

add seven drug investigators. This

will increase our presence to 19

American staff based in-country,

including 10 dedicated specifically

to drugs.”

Besides becoming more fre-

quent, inspections are also more

often unannounced. The days when

companies got three months’ ad-

vance notice are history. Adding to

Indian drug makers’ anxiety is the

nature and scope of the inspections.

“It is no more just a qual-

ity audit of a facility,” says a

promoter of a mid-sized com-

pany. “I remember distinctly

from our earlier inspections

that we never had to drive

down our product develop-

ment people for the inspec-

tion.... They started gradu-

ally getting into how the

product was developed,

which is more of an R&D

forte and not something

Stories doing the rounds in

pharma circles tell of dustbins being

checked at one company, and urinals

in another. The executive adds: “We

look into every minute detail now,

but still just hope and pray that noth-

ing ever goes wrong.” He spoke to

Business Today strictly on the condi-

tion that neither he nor his company

would be named.

As for Baker, data from FDAzilla,

a website that provides intelligence

on the US drug regulator’s in-

spections, suggests that his

share in inspections is growing

in India. In 2012, he was in-volved in only six of the 251

FDA inspections in India, but 21

of the 169 inspections in 2013.

And there is good reason to

worry when he comes knock-

ing. He has been a factor in

many warning letters that

Indian drug makers – notably

Ranbaxy and Wockhardt –

have got from the FDA.

A pharma company CEO,

who does not want to be

named, says: “After I learnt

that the Mohali facility of

Ranbaxy did not have water

heaters in the bathrooms, I

checked all our bathrooms in the

plant, and to my surprise, we did not

have them either. The thought that it

could become a point for closure... I

immediately had them installed.”

Another pharma company head

personally took his team of experts to

check urinals and drains in the plant

after reading the FDA’s observations

on Wockhardt’s factory.

Source of RiskExperts expect vigilance to increase.

Shamnad Basheer, a former professor

of intellectual property law at the

West Bengal National University of

Juridical Sciences, says: “India has

definitely moved up in the priority list

of inspections.” He says companies

that are unable to cope with this may

have to shut shop. He adds: “Big com-

panies will spend more money and

resources in ensuring compliance,

and will pass on the higher costs to

consumers. However, their competi-

tive edge in the market will reduce.”

In September last year, Neha

Manpuria, Pinakin Parekh and Sean

Wu, analysts at JP Morgan Asia

Pacific Equity Research, noted in a

report on the Indian pharmaceutical

industry: “Regulatory headwinds

remain one of the key risks to the

Indian pharmaceutical sector, espe-

cially in light of the increasing scru-

tiny by the FDA to ensure quality and

compliance. While the volume of

warning letters issued by FDA has

increased 10x over the last four

years, there has been a higher impact

on Indian companies recently from

the increasing activities of the US

regulator (import alerts, warn-

ing letters, Form 483s).” Form

483 is an FDA document that

notifies a company of objec-tionable conditions. The com-

pany needs to respond in writ-

ing stating its corrective action

plan, and then, of course, im-

plement the plan.

The authors of the JP

Morgan report note that the

implications are huge. “In our

view, the risk associated with

the changing regulations and

increasing inspection by the

FDA would be a key variable to

track, given the exposure of the

m o s t I n d i a n p h a r m a

companies to the US markets

(revenue contribution of

25-55 per cent for large

domestic companies). A

warning letter or import alert

on any facility not only

impacts the revenue stream

from the unit, but also affects

the drug maker’s ability to

make timely ANDA filing from

the facility.” The ANDA, or

Abbreviated New Drug

Application, is filed for generic

drug approval for an existing

licensed or approved drug in the US.

The report further notes that “higher

FDA scrutiny is likely to result in

enhanced focus and investment on

compliance (and regulatory costs

too).”

The report’s authors say they do

not see a risk to long-term valuations

of the sector, as theUS would remain

C l ose Sc r u t i n y

T he l is t o f F D A wa r n i ngs t

o I nd ia n p ha r ma co m pa n ie

s is lo ng – a nd g ro w i ng

Co m pa n y

Wa r n i ng Fac i l i t y

Da te

wa r ned / Reaso n

Ra n ba x y Se p t 2008

De was a nd Pao n ta Sa h i b

L u p i n Ma y 200 9 Ma nd idee p

S u t u res I nd i a

Se p t 2010 Ba nga lo re

C l a r i s L i fe Sc i e nces

No v 2010 A h meda bad

A u ro b i nd o P ha r ma

Ma y 2011 H yde ra bad a n t i b i

o t ics u n i t

Cad i l a Hea l t hca re

J u ne 2011 Mo r i ya

Yag- Mag La bs

Se p t 2011 H yde ra bad

W i n tac L td

Fe b 2012 Ba nga lo re

Pa n D r ugs

Fe b 2012 Vadoda ra u n

i t – ma nda to r y reg is t ra t io n fo r m

a l it ies no t

f u l fi lled

Sa i P ha r ma

A p r i l 2012 Ma nda to r y reg

is t ra t io n fo r ma l i t ies no t f u

l fi l led

Hos p i ra Hea l t

hca re Ma y 2013 S r i pe r u m b ud

u r

I nd i a

R P G L i fe Sc i e nces

J u ne 2013 A n k les h wa r

a nd M u m ba i

Woc k ha rd t

J u l y 2013 Wa l u j

F rese n i us Ka b i

J u ly 2013 Ka l ya n i – ma

n u fac t u r i ng no r ms v io la t

io n

O nco l og y

Pos h C he m i ca l s

A ug 2013 H yde ra bad

P ro med E x po r ts

A ug 2013 H i mac ha l P r

ades h u n i t

Ra n ba x y Se p t 2013

Mo ha li

S t r i d es A rco l a b

Se p t 2013 Fac i l it y No. 2

o f acq u i red co m pa n y Ag il

a S pec ia l it ies, Ba nga lo re

“We have received approvals from the Indiangovernment to add seven drug investigators. This

will increase our presence to 19 Americanstaff based in-country”

MARGARET A. HAMBURG / FDA Commissioner

COVER STORY Pharma businesstoday.in/pharma-usfda

So urce : F DA and J P Morga

n

For interview and more, see

P I B

Be ing wa tc hed: Ran ba x y’s plan

t in Paon ta Sa h i b, H imac hal

Prades h, is under o bser va t ion b y

t he FDA

52 BUSINESS TODAY March 16 2014 March 16 2014 BUSINESS TODAY 53



54 BUSINESS TODAY March 16 2014

the manufacturing plant people

would be well versed with.” He says

this trend may be because events at

Ranbaxy led inspectors to think that

perhaps development itself was

flawed, and to doubt whether

what was written in the product

development report was actually

done.

Additionally, he says, there

are new guidelines on testing for

extractables and leachables

(minute amounts of chemicals

originating from containers,

medical devices or process equip-

ment, which could end up as

contaminants in the medical

product). He also says they are

now getting into concepts such

as Quality by Design (QbD),

which involves identifying char-

acteristics that are important from

the patient’s perspective, identifying

the material attributes and manufac-

turing parameters to achieve those

characteristics, and then designing

manufacturing controls and develop-

ing methods to make improvements.

Unlike ‘quality by accident’ – taking

corrective action after a failure occurs

– QbD helps manufacturers focus ondeveloping process understanding

and action to avoid failures.

The FDA explains this and more

at length. In her statement before a

US Congress subcommittee on energy

policy, healthcare and entitlements,

Janet Woodcock, Director of the

FDA’s Center for Drug Evaluation

Research, notes that the drug regula-

tor’s inspection and compliance focus

has changed in recent years. She

notes: “We have enhanced our in-spectorate capability and increased

familiarity with the quality systems

model. Some of these inspections

have found operations with anti-

quated or obsolete facility or process

elements, and operations with high

defect rates.... These operations are

receiving higher focus, while manu-

facturing operations that have been

upgraded and are more dependable

have been de-emphasised.”

Woodcock does not specifically

refer to India when she says: “Use of

foreign-sourced materials creates

vulnerabilities in the US drug sup-

ply.... For example, most of the US

heparin supply comes from non-US

sources. When contaminated

heparin, sourced from China, was

found in the United States, FDA had

to urgently devise several tests to de-

tect the contaminant and screen out

contaminated product, because

heparin is a critical drug for US pa-

tients, and there was no adequatealternative source.” Heparin is an

anticoagulant.

Shailesh Ayyangar, Managing

Director of drug maker Sanofi India,

Vice President – South Asia, Sanofi,

and President of the Organisation of

Pharmaceutical Producers of India

(OPPI), a group of largely multina-

tional drug companies, says: “Let’s

face it. We are not in a sellers’ mar-

ket. We are in a buyers’ market, and

the buyer – let’s say, for argument’s

COVER STORY Pharma

100

50

0

150

200

250

2000 2004 2008 2012

India

N U M B E R O F I N S P E C T I O N S

YEAR

Canada

ChinaFrance

Germany

India

Japan

United Kingdom

Source: FDAzilla.com

MOST WATCHED NATIONSHow India compares with other countries in FDA inspections

“It is high time India caught up with globaltechnological developments and practices”

G.N. SINGH / Drug Controller General of India

A . P R A B H A K A R R A O




sake, the US – has the

right to decide whatquality standards it

wants from the second

largest exporter of ge-

nerics to the US. It is

therefore in our inter-

est to ask the right

questions, get the con-

sultants to help us

with systems and

processes.” He notes

that many companies

are getting nervoustoday because a lot of

questions are being

asked, and adds that

regulators face flak in

their own countries if

they approve products

that turn out sub-

standard.

Working withthe FDAWhile standards tend

to evolve continu-

ously, the rapid pace

of change is causing

the industry some

worry. In a recent

newspaper interview,

industry veteran and

Cipla Ltd Chairman

Y.K. Hamied said

about the US: “If you

change the goalposts

every few months

without informingme, how will I know?”

He says he is happy

that FDA’s Hamburg indicated to

Business Today in her first interview

in India that her staff would work

with Indian companies to help them

self-correct. “I am happy if she wants

to take industry into

confidence,” saysHamied.

While Ranbaxy

and Wockhardt are

facing challenges in

getting issues resolved,

others seem to be

achieving greater suc-

cess in addressing US

concerns. For in-

s t a n c e , I n d o c o

Remedies said in a

statement to theB o m b a y S t o c k

Exchange on January

17: “The Goa Plant II

(Sterile) was first in-

spected in October

2005, re-inspected in

February 2011 and

the last inspection was

conducted in August

2013 by FDA. On the

last day of inspection,

the 483 was issued....

In our response on

September 16 to the

483, we have given a

list of the corrective ac-

tions taken.... With the

last compliance report

sent on November 25,

2013, all the issues

stand resolved, and the

Company is awaiting

establishment inspec-

tion report, which nor-

mally takes five to six

months.” Indoco’s

Managing Director,

Aditi Kare Panandikar, says:

“Challenges for some could be in-

creasing also because the regulatory

expectations are also going up.”

All of this, as one might expect,

adds to development costs. “A back-

of-the-envelope calculation showsthat our cost of compliance has

nearly doubled in the last five years,”

says a senior executive who tracks

compliance in a pharmaceutical

company. Others see a smaller hit.

“The cGMP cost of compliance and

maintenance is typically 35 per cent

higher than the usual manufacturing

and maintenance cost,” says Venkat

Jasti, Chairman andCEO of Suven Life

Sciences. cGMP stands for ‘current

good manufacturing practice’, andrefers to regulations enforced by the

FDA to ensure proper design, moni-

toring, and control of manufacturing

processes and facilities. The executive

says many major companies are al-

ready compliant with cGMP require-

ments, and smaller ones will have to

do likewise now.

A Dose ofSelf-improvementBob Rhoades, Vice President at

Quintiles, a consultancy that helps

companies with third-party audits,

staffing, and effective IT in quality

systems, told Business Today in an

email response: “Increasing enforce-

ment activities by the FDA are clearly

having an impact in India and be-

yond.... Regulatory compliance is

definitely more of an issue today than

three years ago – and will continue to

be so.... To protect market share and

reputation, timely achievement of

baseline compliance is vital.... In thisenvironment of heightened regula-

tory scrutiny, we believe traditional

compliance alone – where quality

assurance and compliance are back-

room cost centres – is insufficient.”

Over the past few years, most

leading Indian companies, such as

At 370, India has the second largest number

of FDA-approved plants outside the US

WarningTally

Warning letters issuedto India-based facilities

22009

12010

42011

52012

12013

82014

Source: FDA and

JP Morgan estimates

COVER STORY Pharma




Glenmark and Dr Reddy’s

Laboratories, have been increas-

ing their engagement with exter-

nal auditors, some of whom areeither former FDA officials or

drawn from the pharmaceutical

industry. At present, besides

Quintiles, Lachman Consultants is

among the most sought after.

Leading drug makers have

a l s o b e e n f o c u s i n g o n

strengthening internal audits by

reviewing and expanding the

checklist of items covered. For

e x a m p l e , P a n a n d i k a r

of Indoco, which recentlyunderwent a FDA inspection, says

her company has focused on

strengthening its regulatory affairs

team (currently 35 people) over

the past year. The team tracks

r egu l at or y devel opm en t s

worldwide and regularly updates

the management. Indoco has built a

regulatory affairs network that keeps

people at the corporate level in

constant dialogue with people at all

its plant locations.

Rhoades of Quintiles says his

company is often called in after a

drug maker receives a warning letter.

However, he adds, “in other cases,

companies bring us in proactively to

help identify continuous improve-

ment opportunities within their qual-

ity systems.”

Ayyangar of Sanofi says multina-

tional drug companies with FDA-

approved plants in India have raised

awareness by investing in training

programmes. “We are getting inter-

national experts in regulatory proc-

esses and quality assurance to visit

our plants in India, and we

have also been sending peo-

ple from here to international

facilities so they can learnabout systems approved by

the FDA,” he says. Sanofi

India has two solid dosage

form plants (which make tab-

lets) in Gujarat and Goa, and

a FDA-approved one in

Gujarat that makes active

pharmaceutical ingredients,

and a vaccine plant in

Hyderabad. He says: “They

all comply with international

standards, and we have vari-ous regulatory approvals. We

constantly endeavour to up-

grade the systems.”

Kewal Handa, former

managing director of Pfizer

India, who now runs health-

care advisory firm Salus

Lifecare, says: “Instead of re-

acting in a panic, companies

should proactively take to

improving their quality cul-

ture, and one good way

would be to have some of

these consulting firms con-

duct mock FDA-like audits

and use the findings to im-

prove quality systems.”

Mock audits are not

cheap – a two-month audit

could cost as much as `50

lakh, perhaps more. They

could add to a company’s cost of

compliance by a couple of crore ru-

pees a year, but Handa says it’s worth

it. He adds that companies should

share the action taken in such audits

at the next FDA inspection.

Rhoades says that while quality

problems or enforcement actions may

drive a company to begin its journey

up the “compliance maturity curve”,

Industry sources say compliance with globalstandards typically means 35% higher

manufacturing and maintenance costs

COVER STORY Pharma




the best time to take

action is before such

p r o b l e m s s u r f a c e .“Timely and proactive

e f f o r t s t o d r i v e

sustainable compliance

minimise the risk of

quality problems,” he

adds. He notes that in

more than 35 years of

experience in advising

o n q u a l i t y a n d

compliance issues, he

has found that India is

by no means alone infacing compliance

challenges.

ConcernsBeyond theFDAThe FDA is not the

only concern of

Indian drug mak-

ers. So is the inves-

tigation by the US Inter-

national Trade Commission (USITC)

into allegations of India’s unfair trade

practices. The USITC is scheduled to

submit a report to theUS government

in late 2014. There is no immediate

threat, says D.G. Shah, Secretary

General of the Indian Pharmaceutical

Alliance (IPA), an association of do-

mestic drug companies. But if the re-

port takes a dim view of India, “it

could be used to impose trade sanc-

tions”. Besides pharmaceuticals, the

IT sector could also be affected by it.

Running parallel are arguments

by some inUS industry favouring ac-

tion against India under a provision

t h at en abl es t h e US Trade

Representative identify trade barriers

to the US and act to counter them.

Shah says there is pressure to get

India downgraded from “watch list”

to “priority foreign country”. He adds:

“If a country is put in this category,

like Ukraine at the moment, imports

from it into theUS will attract duties.”

He recently returned from Wash-

ington, DC, where the IPA presented

the Indian case before the USITC. Last

year, Shah presented a testimony

before a US Congress committee in

response to allegations by Pfizer Inc

in March 2013 that India repeatedly

defied trade rules and discriminated

in favour of domestic generic drug

manufacturers, among other things.

Shah says India is compliant with

TRIPS (the World

Trade Organization’s

Agreement on Trade-Related Aspects of

Intellectual Property

Rights), andUS industry

is unfairly comparing

India’s intellectual

property rights regime

with its own.

Indian RegulatorAlso ConcernedThe Indian regulator, the

Drug Controller General ofIndia (DGCI), also wants to

review provisions on qual-

ity. Its head, G.N. Singh,

says it is looking to step up

on good manufacturing

practices. He says ‘Schedule

M’ of the Indian Drugs and

Cosmetics Act, for instance,

needs to be revisited. He is

referring to the part of the

law that specifies the require-

ments for factory premises

and materials, equipment, and mini-

mum recommended areas for basic

installation for some types of drugs.

He says that during the last drug

consultative committee meeting, held

late last year and attended by the dif-

ferent drug regulators in the country,

he emphasised that it was high time

India caught up with global techno-

logical developments and practices,

and had science-based practices and

dynamic processes. He says: “As part

of this, there is a plan to review and

strengthen Schedule M and harmo-

nise it on the lines of the World

Health Organization’s ‘Good

Manufacturing Practices’.”

In the meantime, Indian drug

makers will be taking note of Peter

Baker’s observations at the Toansa

plant, and checking for flies in the

sample preparation room and broken

storage cabinets. ~

@EKumarSharma

L o st V al ue Some ex a m ples of th

e ef f ect of F D A w a r ning s on the sha r e pr ices of listed dr ug com pa nies Com pa n y

W a r ning % D ecline in stock a f ter w a r ning

D a te M onths

O ne T hr ee Six Ranb ax y Se p 20 0 8 - 33 - 47 - 63 A ur o b i nd o P har ma M a y 20 11 - 10 - 29 - 58Cad i l a H e al t hc ar e J un 20 11 - 3 - 9 - 22RP G L i f e S c i e nc e s J un 20 13 - 3 - 11 20W o c k har d t

J ul 20 13 - 52 - 51 -55F r e se ni us K ab i J ul 20 13 - 16 - 12 -8Onc o l o g y

Ranb ax y Se p 20 13 -15 - 9 -24* S t r i d e s A r c o l ab Se p 20 13 - 6 - 1 -60* * Stock per f or mance as of F eb 18, 2014, as si x months ar e not ov er y et

Sour ce: F DA, B T Resear ch

COVER STORY Pharma

US markets account for

25% to 55% of the revenues oflarge domestic companies

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